ObamaCare will squeeze education, other needs

Nevada Medicaid commitments on track to crowd out alternative priorities

Often lost in the debate over the Patient Protection and Affordable Care Act (PPACA) — the sweeping health care "reform" legislation popularly known as ObamaCare — is the negative impact it will have on education, public safety and other public services as health insurance subsidies begin to consume a greater share of state spending.

Congressional Democrats claimed, when passing PPACA, that the dramatic expansion of entitlements it entailed would actually lower the federal deficit. They were only able to make this claim, however, because they had intentionally shifted most of the bill's costs forward into the future — beyond the 10-year window of costs examined by the Congressional Budget Office — and also down upon the states. Indeed, a central component of the plan is to enroll an additional 16 million individuals in state Medicaid programs.

State Medicaid programs are jointly funded by federal and state governments according to a formula determined each year based on a state's median per-capita income level. States with lower incomes receive a greater share of federal dollars into their Medicaid programs, but in no case does the federal share account for less than 50 percent. In Nevada, federal funding will account for 59.26 percent of Medicaid costs in the 2011-13 budget cycle — an increase from recent years. This leaves state taxpayers directly liable for 40 percent of the program's costs.

A recent analysis conducted by the Nevada Policy Research Institute shows that, even prior to the passage of PPACA, Medicaid spending in the Silver State was on an unsustainable path. Medicaid cost increases have outpaced the growth in gross state product for more than a decade, as Medicaid has become the fastest-growing expenditure in the state budget. With 268,000 enrollees, 10 percent of the Nevada population is currently enrolled in Medicaid at an average cost of $4,770 per person. Even without PPACA, by 2023, the number of enrollees is estimated to increase by 112,000, growing to encompass 12 percent of the state population.

PPACA will only exacerbate this growth. First, the program loosens the eligibility requirements for Medicaid from 100 percent to 133 percent of the federal poverty level. As a result, 267,000 newly eligible individuals are expected to enroll in Nevada Medicaid by 2023. While PPACA stipulates that the federal government will pay all the costs of covering this newly eligible population between 2014 and 2016, the level of federal support will taper to 85 percent thereafter and may eventually fall to the standard federal match rate (currently 59.26 percent).

At the same time, the individual mandate provision within the legislation will induce an estimated 104,000 individuals, who were eligible under the old rules but, for whatever reason, elected not to join, to enroll in Medicaid by 2023. There is no provisional federal match rate to help states finance the cost of caring for these individuals. As such, the additional financial burden faced by state taxpayers is even more significant with regard to the "old eligible" population than with the "newly eligible" population.

Combining these two populations, PPACA will expand the number of Medicaid enrollees to nearly 800,000 by 2023.

Under a variety of assumptions regarding the future of federal match rates for the newly eligible population, the legislation will increase state Medicaid costs from $5.4 billion to $5.7 billion over the period from 2014 to 2023. When added to the $11.99 billion that Nevada taxpayers are projected to spend on Medicaid over the same time period without PPACA, the total approaches $17.7 billion.

With an additional $5.4 billion being diverted from state coffers by 2023 in order to finance a dramatic expansion of Medicaid, lawmakers will necessarily find themselves with that much less money to spend on education, public safety, economic development and other areas of state spending.

Indeed, PPACA seeks to reorder the priorities of not just Nevada, but all 50 American states.

Under any fair reading of the Ninth and Tenth amendments to the U.S. Constitution, the legislation is, on its face, unconstitutional.

Geoffrey Lawrence is deputy director of policy at the Nevada Policy Research Institute. For more information visit http://npri.org.This article originally appeared in the August 2011 edition of Nevada Business.

Issues

Geoffrey Lawrence is Nevada's Assistant Controller where he oversees the state's financial reporting and transparency efforts along with Nevada's elected controller, Ron Knecht. Geoffrey is a frequent commentator on public policy in print, radio and television news in Nevada and his work appears regularly in publications around the state and the nation. Geoffrey previously served as NPRI's Director of Research and Legislative Affairs until December 2014. He holds an M.A. in International Economics from American University in Washington, D.C. and is currently pursuing an M.S. in Accounting from Western Governors University.